Every year millions of people set goals to improve their life over the course of the next year. Unfortunately these same people find themselves failing to meet their goals, or worse, find themselves in even more trouble at the end of the year. This is even more noticeable when it comes to people’s personal finance goals. Many people start the year out by setting noble goals to save more, get out of debt, buy a house or some other financial goal, only to be disappointed in 365 day’s time. Worse, so called financial experts have written thousands of articles advising you with fluffy New Year’s Resolutions that you need to make to improve your financial life but have lead you astray. Today, I’m going to give you four tips that will actually improve your personal finances based on how the wealthy manage their money.

Reduce Your Bad Debts

Bad debt is a cancer to your wealth. This one area of personal finances has single handedly destroyed the middle class more than any other financial mistake. Big houses, luxury cars, vacations that are paid for with credit cards and the need to have the latest gadgets have all contributed to huge bills, bills that cost more to pay per month than the salary of the person owning them. Pay off your bad debts as aggressively as possible. This will save you thousands in interest payments and will also free up more cash flow for other needs and to invest.

Figure Out Your Net Worth

Net worth is simply what you own minus what you owe. I rarely meet someone who even knows what net worth means much less what their net worth is. Start this year by figuring it out and then monitor it each year to see what direction you’re headed in. Net worth is a valuable tool that instantly shows you if you have too much debt. It also helps you gauge where you stand to others because average net worth data is readily available. In an instant, you can see if you’re even worth anything after your debts are paid. More than that, it will show you what your estate will owe in the unfortunate event of your passing. Once you calculate this every year, you’ll know if you’re getting richer or poorer and can begin to investigate what the root cause(s) were that made that change happen.

Start Saving 10% or More of Your Income

You may have heard that it “takes money to make money”. This statement is true. Although you can get money from other people, the easiest way to invest money is to use your own. To have your own money, you need to save money. Statistics show that in America, savings rates are currently at about 1-2%. A decade ago they were negative. This is not enough to help your finances. The wealthiest people in the world save around 20% of their income and then they invest those savings into various investments that gain 30% or more on that same money. Start by cutting out things that you don’t need like entertainment, eating out, cable packages and the sort. If you make $2,000 per month, your goal is to put $200 per month in the bank. If you can do more than that, go for it; the more, the better. Then learn how to invest that money across several areas to make returns above 10%.

Insure Yourself

Sports fans have surely heard that “the best offense is a good defense” and that’s exactly what insurance provides. Nothing can cause you a problem faster than an unexpected costly event. Medical bills and premature death can put you or your family into financial trouble fast. A natural disaster that ruins your house can leave you devastated. Even if you get into a small car accident and injur someone, the court ordered bills can crush you. You need insurance to cover massive windfalls. You also need enough life insurance to pay off your debts in the event that you pass away unexpectedly. Best of all, it doesn’t cost that much to protect yourself. There are so many insurance companies competing for your business that rates are affordable if you look around.

So there they are real resolutions that will actually help your financial situation. Now it’s up to you to do the hard work and follow them all year long. Don’t just get excited about these resolutions for 30 days and then give up, keep checking up on your status all year long. Of course, insurance is a one-time event, so once that’s in place; you only need to focus on the other three. Most of all let me know how you’re doing with executing these goals for yourself. Happy New Year!

About the Author

Jamie has an MBA from Rutgers University and a Professional Certificate in Real Estate Finance, Investment and Development from NYU. He’s traded stocks since he was 13 and bought his first property within a year of graduating college. He also flipped properties but got out before the 2008 mortgage meltdown because he was able to see the market turning before it happened. He’s started two companies and has experience in investing in antiques, collectibles, gold, silver, trading options and Forex. Jamie currently runs a website dedicated to helping people achieve financial freedom.

I have increased my retirement contribution to 10% of my monthly salary and I am so happy that I did it. Also this year I am really working on just doing things differently. If it didn’t work last year I’m gonna try to do it a different way. Finding ways to reduce your debt means, changing some bad habits. Its hard but so worth it.

Figuring out your net worth is great motivation. My wife and I use it to push our savings and investments forward. We try to increase our net worth by 10% or more each year. Last year, we were able to to hit 13%.

Of course, saving more is the key – along with paying off debt – so if you track your net worth, you will have to save more and pay off debt to do so.

My resolution this year is to get on top of money that is owed to me (tax return, lost dividends and reimbursements from work). I seem to keep putting these things off, but it would probably only be a couple of hours work if I put my mind to it!!

I like the point about saving 10%. My parents didn’t save anything when they were working and retired with nothing. Its been a real strain on them and actually the entire family as we try to support them as well. They are embarrassed to ask for help, but they need to. I can only imagine how difficult it would be for a retired couple, with no savings, who do not have a family to help them out.